TURKEY: Insurers' profitability may be maintained despite the current currency crisis

A stagflation scenario is a highly probable in Turkey and the non-life insurance market will be impacted. On the other side, due to inflation and higher interest rates, insurers will also see higher investment income, Yilmaz YILDIZ, CEO of Zurich Insurance Turkey told the World Finance quarterly.

YILDIZ explained that Turkey is going through a currency crisis, not a financial crisis or an economy-wide one, which means that "with the right measures to contain this currency crisis, it will not be too difficult for Turkey to get back to its growth trajectory very soon." In fact, he emphasized that one should not miss the strengths of the Turkish economy, which are all still in place: "What made Turkey a very attractive emerging market - most of those are still in place. Huge market of 80 million people? It's still there. Location? It is still there. A young, well-educated population, positive demographics? It is still there." The Turkish economy's diversification will also helpful.

Speaking on the currency crisis' impact on the insurance industry, YILDIZ said a slowdown in premium growth rates across all lines of business is to be expected, while the high inflation is leading to a substantial increase in claim costs. However, overall the profitability may not suffer as the investment income is expected to grow, given the strong inflationary trend (annual inflation rates of 25% at the end of 2018) and the increase of interest rates by the central bank. In short, while the core insurance business will inevitably suffer, because of higher costs of claims lower income from insurance operations, the overall profitability of the insurance undertakers may be maintained or even improved in some cases.

Regarding the 2018 results recorded by Zurich Insurance Turkey, he said that "they have been very good so far - even despite the volatility in the last two quarters," and company will meet or exceed its targets. "Because Turkey and Turkey's insurance market is still very attractive, and if you have the right strategy, the right team, and a good execution track record, there's no reason why you shouldn't be making your targets or exceeding your targets going forward." Yilmaz YILDIZ concluded: we're very confident about the future, and in the short-term; yes, sometimes different things happen - not only in Turkey, around the world. We take measures; we move on."